MUMBAI: Federal Reserve Chairman Ben Bernanke’s remark on the economy disappointed financial markets, particularly commodity markets, which have witnessed a sharp slide in prices.
Prior to the Bernanke testimony, there was a pullback in commodity futures, helped by the Euro gathering strength against the US dollar and the possibility of a global economic recovery.
However, the markets slid soon after the testimony, which spread bearish sentiments across various asset classes.
Crude oil futures extended their losses for the second day in a row, but have managed to hold above $76 a barrel despite a flurry of selling pressure, after Federal Reserve Chairman Ben Bernanke’s expression of concern about the economy and an unexpected rise in crude oil inventories last week.
NYMEX crude for September delivery was up 6 cents at $76.62 a barrel, after settling down $1.02 at $76.56 a day earlier, its first decline in three days. On Wednesday, optimism about the economy lifted oil prices to $78.57 in early trading, the highest since June 28.
Fed Chairman Ben Bernanke said in testimony before the Senate Banking Committee that the economy faces “unusually uncertain” prospects and that the central bank was ready to take further steps to bolster growth, if needed.
US crude stocks rose 400,000 barrels last week, distillates jumped 3.9 million barrels and gasoline stocks gained 1.1 million barrels, the US Energy Information Administration said.
China’s gross domestic product is forecast to grow about 9.5% this year, the State Information Centre, a government think tank, said in a report published in the official media on Thursday.
China’s GDP grew at an annual rate of 10.3% in the second quarter of this year, slowing from the first quarter's brisk 11.9% pace as Beijing steered monetary and fiscal policy back to normal after a record credit surge to counter the global crisis.
Gold dropped about half a percent as the euro slipped against the dollar and equities weakened after Federal Reserve Chairman Ben Bernanke expressed concerns about the health of the economy.
Spot gold fell $6.50 to $1,185.25 an ounce, within sight of a 2-month low around $1,175 an ounce struck on Tuesday. Bullion was more than 6% below a lifetime high hit in late June.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said holdings were unchanged at 1,308.13 tonnes. The holdings hit a record at 1,320.44 tonnes on June 29.
Base metal counters showed signs of tiring out as sluggish global cues prompted investors to liquidate long positions. Shanghai copper was seen declining following the Fed chairman Ben Bernanke's comments on the “unusually uncertain” outlook for the economy.
Three-month copper on the London Metal Exchange (LME) fell 1.2% to $6,770 a tonne, after rallying 3.2% in the previous session to a three-week high. Last night, copper prices surged 3%, helped by growing optimism about the global economy.
Chinese refined copper imports fell for a third month running in June, down 24% from the previous month but falling Shanghai stocks and rising domestic markets implied demand for the metal, and analysts said the slowdown in buying from the international markets in recent months was supportive of a longer term rally.
Analysts have been worrying about slowing Chinese demand after the nation moved to rein in certain sectors, including commodity-intensive areas like construction.
Domestic commodity counters have turned largely softer following the trends in global commodity prices. Meanwhile, the rupee’s fall against the dollar to near its 6-week low checked the decline in commodities prices.
MCX crude oil futures for August moved lower following the decline in NYMEX crude oil futures. The contract was last trading 0.5% lower at Rs 3,626 per barrel after spending the session between Rs 3,643 and Rs 3,615.
Precious metals counters turned lower following the weak trend in global markets. MCX Gold contract for August settlement was last trading at Rs 18,261 after having spent the session between Rs 18,345 and Rs 18,241 per 10 grams. MCX Silver September settlement contract was trading 0.4% weaker at Rs 28,668 per kg, after having opened the day at Rs 28,777.
Base metal counters have been maintaining a steady trend so far despite the soft trend in global metal prices. MCX copper for August settlement added 0.5% to trade at Rs 322.80 per kg. MCX zinc July contract traded marginally up at Rs 89.05 per kg.
